RUTH SUNDERLAND: Footsie out of the big league

The London stock market has for generations played host to some of the biggest and best-known companies in the world. 

Yet the UK cannot boast a single name in the superleague of the world’s top 20 most valuable businesses, which were ranked in the FT last week. This should be a concern to millions of savers. 

Putting money into the FTSE 100 index or a tracker fund has been considered a gold-plated option for British small investors – now it has a distinct air of second division. 

Downward spiral?: Putting money into the FTSE 100 index or a tracker fund has been considered a gold-plated option – now it has a distinct air of second division

Stashed as it is with ‘old economy’ banks, oil companies and mining conglomerates, the Footsie no longer looks a good choice for a stake in the new world order. 

The blue chip index is up by more than 18 per cent over the past year. But the popular Scottish Mortgage investment trust, heavy in US tech stocks, has increased by more than 90 per cent over the same period – and that is after some recent setbacks. 

The pandemic threatens to make the UK’s leading share index look even more outmoded. Post-Covid, there is likely to be even more of a tilt towards fintech, green tech and online shopping, all of which are fairly conspicuous by their absence. 

The lumbering UK banks, with their legacy branch networks, look unappetising, as do the oil giants, BP and Shell, which are re-inventing on greener lines. Miners have bounced back because of the demand for commodities but they also face multiple challenges on the now all-important environmental, social and governance front. The UK’s most valuable listed business is Anglo-Dutch consumer goods giant Unilever. Soberingly, we almost lost that company because it wanted to shift its primary listing away from London to Rotterdam. 

One of the motivations was that, after fighting off a hostile takeover from Kraft Heinz, the management wanted greater protection from unwanted bidders. 

It is a mercy the move never happened, as it would have deprived the FTSE of one of its best constituents. Only a campaign prevented the defection. 

Apple, the world’s biggest company, is worth around £1.6trillion, which dwarfs Unilever at £111billion and is not far behind the entire market cap of the FTSE 100 of around £1.86trillion. 

There is no inherent reason the UK shouldn’t create its own trillion dollar tech businesses. Brainpower at Cambridge can rival anything at Stanford in California. The fenland town plays host to a thriving community of innovative businesses including Alphawave, an Anglo-Canadian chip developer planning a London float, which intends to set up a research centre nearby. 

Cambridge is also home to Darktrace, which made its debut last week and got off to a flying start. AstraZeneca, our second largest company by market value, has research facilities there too. 

A review by Lord Hill has looked at ways of attracting more tech listings. That may help, but there is another, possibly bigger problem as the Unilever experience shows. 

It is too easy for UK listed businesses to be picked off by predators. Arm Holdings, another Cambridge company and the closest thing the UK had to a tech champion, was sold to Softbank of Japan in 2016. Softbank presented as a long-term investor but wants to sell on to Nvidia of the US. 

That deal will now be examined by the Government, but even so, managements are often too eager to roll over to the first plausible bidder who comes their way. 

Unless the sell-out culture changes, we will have little chance of building the most valuable companies of tomorrow.

This post first appeared on Dailymail.co.uk